Any luck in receiving Gross Rent from PM?

Discussion in 'Property Management' started by myhillg, 16th Oct, 2015.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Costs less as the bank discounts the rate due to the benefit of having your money longer.
     
  2. S.T

    S.T Well-Known Member

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    Correct, Terry's strategy is the only benefit, which is what the OP is trying to do....
     
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  3. chylld

    chylld Well-Known Member

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    PM just approved me for this!! Can prepay either monthly or quarterly. Checking with accountant first for any special requirements (as long as it's invoiced properly, don't see any issue)
     
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  4. chylld

    chylld Well-Known Member

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    Accountant said all ok, just received invoices from PM for november management fees.

    Debt recycle speed up by $200+ per property!!

    Thanks @myhillg for asking this question and inspiring me to act :)
     
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  5. D.T.

    D.T. Specialist Property Manager Business Member

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    What details were on the invoice?
     
  6. chylld

    chylld Well-Known Member

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    The usuals (agent ABN+details, my details, invoice date)
    Management Fee 01/11/2015 - 30/11/2015
    GST
    Total Due
    EFT transfer details (unique reference for each property)

    edit: 1 invoice per IP per month
     
  7. S.T

    S.T Well-Known Member

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    Got much confidence in your PM? What's the bet, they forget to remove the charges from their system and you get 'double dipped' for the first month, ha!
     
  8. chylld

    chylld Well-Known Member

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    Pretty confident... in the past I've asked to pay a maintenance bill separately and they obliged without stuffing up the corresponding rental return statement :)
     
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  9. D.T.

    D.T. Specialist Property Manager Business Member

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    Chylld - I'm always interested in learning new ways of doing things that might benefit people. It would actually be a bit more fiddly to do that arrangement, but if people like it then I might offer it. Did they charge you the same as before or more/less with this arrangement?
     
  10. chylld

    chylld Well-Known Member

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    Same. Well, a few cents different from September's invoices (not sure why... both Sept and Nov have 30 days?) so I can't set up an auto direct debit, but my portfolio isn't massive so it's well worth the effort of doing a few manual transfers each month.
     
  11. myhillg

    myhillg Member

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    @chylld: No worries! Thats what these places are for... I'm still trying to get the OK from my PM, but so far no joy.

    Just need to get them to understand there is no risk in them not getting paid (they'll still have my rent!) and I'll offer to pay up front, monthly. Worst case scenario is the current lease is up in Jan... and we can 'negotiate' then....

    @D.T.: think it's a valid offering for quite a few owners. Especially those who may be sitting out of of buying anything for a little while, but may have already got finance available through a LOC or IO split.
     
  12. Xenia

    Xenia Well-Known Member

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    As a principal of a real estate license I need to be honest and say that I would not take on this business. Why not manage it yourself if you need to have gross rent?
     
  13. chylld

    chylld Well-Known Member

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    probably because I pay my property manager to do many many more things than make rental management invoices
     
  14. myhillg

    myhillg Member

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    Because I believe that PM is an important role and I am happy to pay for the experience that good PMs have with regards to finding and managing tenants, leases and all the associated issues. They do a much better job than I would!

    I want to make the point that I'm very happy with my PM and the fee structure.

    In my case it would help with debt recycling, cash flow and ultimately could have the next deposit ready sooner... which would bring another property to the PM!

    It's an accounting problem, not a PM one.
     
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  15. Greyghost

    Greyghost Well-Known Member

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    Business's should always look to define themselves and obtain a competitive advantage. Eg the first internet company to offer unlimited data use.

    It is my general understanding that I have PM's in place as they have skills I do not.. Anyone can collect rent and DD into an account.

    It is also my understanding that PM's work for the property owner (contrary to how some of them act).
    So if you as the PM can offer a better service or an advantage that appeals to me, something they most PM's are not offering, then why wouldn't you do so??
    Surely if you obtained 4-5 investor clients that came to you specifically for this reason they travel in groups, so you could build good business on this. Quality clients - with multiple properties each, as this offering is appealing to the investor with a solid strategy..

    Also, I fail to see the risk in this. You have my rent.. I don't pay a $100 invoice for one month, you have $1300 of mine....

    Minor increase in admin work, but the upside and potential for growth in your business and referrals is large..

    If I was running a PM business I would try and carve out a niche for myself using such methods...

    - also, if you believe your business is just collecting rent, well.....
     
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  16. DaveM

    DaveM Well-Known Member

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    I can see both sides of the equation. The challenge for the agent is they now have to manage two sets of receivables.. tenants and owners. And while there are undoubtedly a majority who would pay the PM fee invoice promptly, there will be some who would delay and not pay and require constant chase ups to get paid.

    There would be ways to work around this, such as any invoices past due get deducted from rent held in trust, but for the small number of people wanting this, most agents would take the less work route rather than the client feature route and cut those landlords loose.
     
  17. Xenia

    Xenia Well-Known Member

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    Probably best to discuss all these types of needs upfront before a management agreement is signed so that both parties can decide whether they want to enter into that relationship and yes it does turn out to be a long-term relationship.

    I agree with above that there are other factors that come into play when deciding and of course an entire portfolio of properties maybe considered more favourably then a single property with the specific need. The overall contract value of the property would also make a huge difference on deciding.

    I have one single client with a portfolio of about 40 properties and all within the eastern suburbs of Adelaide with a rental range of $450 to $900 per week, as this is a key client for my company it would be difficult to refuse him the request to invoice him every month for property management fees. Lucky for me I don't see this ever being his focus

    Also I don't personally run the admin side of my business that's not my strength but from my understanding the property management software would automatically charge management fees and then they would need to be refunded manually also as this is not a normal property management procedure there would need to be a pop-up message for each property that this is to be done for to remind the admin staff to do it.

    It's not part of a normal systemised process and therefore many things can go wrong that's why I would personally not do it unless there were some real benefits that outweighed the risk.

    This would be okay for a very small property management company to incorporate if the rent roll is under 100 properties then yes it can be implemented more easily.
     
  18. chylld

    chylld Well-Known Member

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    I'm with McGrath. I think they might be managing more than 100 properties.
     
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  19. myhillg

    myhillg Member

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    I've just had confirmation from the Director of my PM Agency that they will be doing this for me going forward.

    Major agency in Sydney inner west, pretty sure over 100 properties on the books.

    During a tenancy rent is collected monthly and therefore the PM fees are fixed so I will make a payment of this amount each month on the 20th. Gross rent will be remitted back to me at month end.

    A very happy customer....
     
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  20. myhillg

    myhillg Member

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    It actually seems easier than first thought.

    I received a tax invoice each month anyway with all these costs as part of my monthly statement. But they were deducted from the gross rent.

    All I do now is pay the fees direct from LOC to the PM trust account using my property reference (I assume its received and processed the same as rent).

    When the monthly invoice is prepared there are now two income transactions for the property
    - Rent Received (from tenant)
    - PM Fees Received (from me)

    The usual debits apply and remove the PM fees and then the rent will be remitted in full. Simple! I'm not sure what's going on on the back end but it seems like it should work with no additional management from the PM side.
     
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